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Fractional Reserve Banking Explained – by The Kahn Academy

The Kahn Academy is an excellent source for all sorts of educational lectures. It was started by a hedge fund manager who sought out a way to help teach his cousin math.

Wiki notes the history:

In late 2004, Khan began tutoring his cousin Nadia in mathematics using Yahoo!’s Doodle notepad. When other relatives and friends sought similar help, he decided it would be more practical to distribute the tutorials on YouTube. Their popularity there and the testimonials of appreciative students prompted Khan to quit his job in finance as a hedge fund analyst at Connective Capital Management in 2009 and focus on the tutorials (then released under the moniker “Khan Academy”) full-time. Bill Gates once said that “I’d say we’ve moved about 160 IQ points from the hedge fund category to the teaching-many-people-in-a-leveraged-way category. It was a good day his wife let him quit his job.”

The founder, Salman Khan, is an ivy league educated math wiz. Frankly, I’m shocked that the ivy league education didn’t corrupt his brain into believing fraud is a viable way run a monetary system. Most ivy league educated MBAs come out their education believing the Fed, and its associated fraud, are the greatest things since sliced bread; because those are the types of people who are typically employed by the commercial banks.

Khan could have taken a job at Goldman and become a multi-millionaire given his educational background, but instead he chose to help people rather than defraud them.

Sal’s educational background:

Before quitting his job as manager of a hedge fund to run the Khan Academy full time, Sal also found time to get three degrees from MIT and an MBA from Harvard.

Here is a three part series he put together on the nature of fractional reserve banking; it pretty much adheres to the Austrian school’s interpretation. It’s a great primer that explains why fractional reserve banking is nothing more than a Ponzi scheme that is inherently unstable.